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    How to create a monthly budget

    A monthly budget is one of those often overlooked but incredibly important financial necessities that can change the way you manage your finances. Regardless of your salary, expenses and financial obligations, a monthly budget equips you with the power of control over your money, which saves you from nasty surprises, like running low on cash before the month is over or forgetting to make certain payments that aren’t set as debit orders to your account.

    Another important factor to consider is saving, which is much more achievable when a monthly budget is in place. For many low to middle class South African citizens, it can seem nearly impossible to save money on a monthly basis, as there are rarely enough finances left to save by the end of the month. Once your monthly budget is implemented, your spending plan is outlined from the beginning and can include savings.

    In order to set up an effective and realistic monthly budget, you cannot paint over any expenses – it is important to be honest with yourself, even if the results are an eye opener.

    1. The first step to creating a monthly budget is to identify your income. If your salary or income changes from month to month, use the lowest overall figure (your basic salary or income before any extras) to accommodate months were your commission or extra income might not form part of the picture.
    2.  Once you have a clear idea of your monthly income, you need to identify and separate your expenses into categories of fixed expenses, (which include rent or mortgage, car payments, medical aid, insurance and loan repayments) Essentials (which include utilities, petrol and groceries and kids extra murals) and other expenses (anything extra, such as trips to the mall, hair appointments or outings with the family). It can be helpful to check your past bank statements to gather some of this information.Once you have completed step 2, you should also be able to determine if you are spending more than you’re earning each month. Small expenses, such as a takeaway coffee every week, can quickly add up.
    3. Set money goals. If you are over indebted, a budget can help you to identify unhealthy spending habits and set goals. Working within a budget that restricts your spending habits can help you to avoid more debt, leaving you free to focus fully on overcoming existing debts with the help of our professional Less Debt team.
    4. Make the necessary adjustments to your way of spending before concluding a finalized budget. If it is necessary, cut out excess costs – remember, the less you spend, the more room you have to save and pay off your debts more quickly.
    5. Prepare for worst case scenarios. Life is unpredictable and financial setbacks happen when you least expect them. Always have an easily-accessible emergency fund available to avoid taking out last minute loans.

    By following these steps and sticking to your monthly budget, you will find that your financial situation gradually improves. For professional Debt Review and Debt Counselling services, check in with our Less Debt team today.

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